Beginner’s Guide to Income Protection

What is income protection?
Income protection, commonly known as IP can provide monthly tax-free payments that replace part of your income. These payments help ease any financial hardship if you’re not able to work.

The cover usually pays out until you are able to start working again or until the end of the benefit or policy term. You can claim multiple times during the term of your policy.

You can also take out budget income protection which usually costs less but the payment period is limited for each claim.

Why should you take out income protection?
In the UK nearly a million people find themselves unable to work because of serious illness or injury every year (ABI 2015).

If you become unable to work, would you cope by surviving on your savings, sick pay or on state support, which is currently as little as £57.90 a week? If not, it is likely you will require an alternative way to continue to pay your essential bills and it may be worthwhile considering income protection.

How much does income protection insurance cost?
The cost of a policy will vary depending on various factors such as:

  • Age – usually the older you are the more you will have to pay for income protection.
  • Job – you may be asked to provide details on your job. If your job involves extra risks such as working at heights it is likely that you will have a higher premium.
  • Occupation definition – if your policy covers your own occupation it means you will be covered if you have been declared medically unable to do your own job. If you want to pay a lower premium you could opt for any occupation which means you won’t be covered if you are still able to work in any job or suited occupation which means you will be covered if you can’t work in a job similar to yours.
  • Smoker status – some providers will want to know your smoker status, if you are a smoker you may have to pay a higher premium.
  • Health – if you are in good health, have a low BMI and no family history of health risks your premium should be more favourable. However, some providers don’t take health into consideration.
  • Income to be covered – the higher your salary, the more income protection will cost you each month.
  • Waiting period before the policy pays out – you generally set payments to start after your sick pay comes to an end. The longer the waiting period, the lower the monthly premiums.
  • Range of illnesses and injuries covered – generally the more the policy covers, the greater the premium will be.

Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.

If you would like advice on taking out or reviewing your income protection policy then speak to one of our advisers today!

7 Great Reasons to Contact Your Adviser

1. Your circumstances have changed
In a very short time your circumstances can change significantly. Many life events can come and go without you considering the implications they could have on your mortgage or on your protection needs. If you think something may have changed that is of importance, such as marriage, having children, a change of job or even changes to your health, let us know so we can revisit your mortgage and protection options.

2. You aren’t fully protected
We want to make sure you are protected should the worst happen. If you didn’t take out any protection when you took out your mortgage it may be a good idea to revisit this decision. Your financial position may have also changed since you first took out your mortgage. This means you could now have more money in the budget to build on your existing cover or start protecting yourself, your family and your lifestyle.

3. You could be saving money on your mortgage
If your current mortgage deal is coming to an end you will automatically be transferred on to your lender’s standard variable rate. This means you may end up making higher monthly repayments. If you want to check you are not paying more than you need to on your mortgage, then we are here to help you.

4. You are considering investing in another property
There are many ways you can invest in property. If you are thinking of investing in a buy to let property, a holiday let or another property investment option, then give us a call and we will be able to advise you along the way.

5. You want to help your children buy their own home
If your children are now all grown up, they may be looking to fly the nest and purchase their very own property. We would love the opportunity to help them find the right mortgage. We can also give you advice on all the different ways you can help children take their first step onto the ladder.

6. To discuss the mortgage and protection market
The mortgage and protection market is constantly changing. We would be happy to discuss changes in the market that could affect your mortgage, protection or future plans.

7. You were declined for a mortgage in the past
You may have previously been declined for a mortgage. However, there are now many more specialist lenders available to us. This means we have more options to help those with complicated borrowing scenarios. So, if you have been declined in the past it doesn’t mean the door is shut forever!

Don’t forget you can refer your friends and family to us– we are always happy to help!

Are micro homes the future of property?

What is a micro home?
A ‘micro home’ doesn’t have a strict definition, but is broadly classed as a home with a floor area under 37sqm, which is also the minimum size for a studio.

Micro homes are typically in prominent locations and often have communal areas inside and outside. The newer homes are usually well designed and have features such as air ventilation and good sound insulation.

How common are they?
There are high numbers of micro homes in major cities such as London, Leicester, Liverpool, Cambridge and Bristol. Demand for cheap housing in urban areas along with rising house prices has driven up the supply of these small establishments.

Micro homes are great for a cheaper alternative to regular sized properties, coming in at an average of £279,000 in London, which is less than half the average price of London homes sold in 2016. This shows they are a cheaper method of getting on to the property ladder, but buyers should also consider whether they will be a good investment and if they will be happy living in such a small space.

Who are micro homes built for?
As micro homes tend to be cheaper, close to cities and small, they are mainly bought by first time buyers and young professionals. However, they are often advertised to investors who benefit from capital growth and rental income.

How easy is it to get a mortgage on a micro home?
It is a common misconception that micro homes are extremely hard to mortgage. While they may be trickier to agree a mortgage on, some lenders will consider this type of property (subject to valuers comments). The likes of Santander, Nationwide and Halifax do not have minimum requirements for the square metre size of a property to make it eligible for a mortgage.

If you would like some more advice on the prospect of buying a micro home then speak to our adviser today

Are you Covered for Mental Health?

Critical Illness Cover and Life Insurance are vital to ensure you and your family are covered against worst case scenarios. But what about the most common scenarios?

This is where income protection* comes in. It normally pays up to 60% of your income and protects against long term absence. It serves as daily peace of mind should you need time off work, you won’t have the added stress of worrying about covering the bills.

How common is absence for mental health?
According to ECIS data, absences for mental health are as common as absences for colds and bugs. This makes mental health now one of the top three reasons for employee absence, with musculoskeletal conditions and general sickness.

The problem doesn’t look like it’s going away anytime soon either, with a recent NHS report showing that nearly a third of ‘fit for work’ notes issued by GPs are for psychiatric problems. This has now made it the most common reason for ‘fit for work’ notes to be issued, ahead of musculoskeletal diseases.

How can I cover myself?
Fortunately, most income protection providers pay out for absence for mental health, which unless you have budget income protection, will pay out for every occasion you are absent from work after the deferred period has elapsed.

It is also important to ensure that should you be off for mental health problems, you don’t have the added stress and anxiety of not working and not being paid. This can exacerbate the problem itself and extend your absence. What if I already have

What if I already have cover?
We recommend a good protection menu plan that covers all the scenarios that might make you vulnerable to financial shocks. Serious illness and injury are all too common reasons to be absent long term from work, which will not be covered by Life and Critical Illness cover.

Right now, absences from work for mental health are becoming more long term, with one in five psychiatric ‘fit for work’ notes issued for periods of over 12 weeks. This means that your employer being able to cover you during the period of absence becomes less likely, which makes income protection even more important.

*Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.

We can work with you through your budget to ensure you have the most comprehensive cover possible, to protect against both worst case and common scenarios. Contact us today to arrange a meeting.

3 Reasons to Take Your Policy Out of the Drawer

The whole point of protection is to deliver peace of mind, with the knowledge that you and your loved ones are financially covered should the worst happen. So it is understandable to pop it in the proverbial desk drawer and forget about it. After all, it’s nice to know you are covered.

But as your adviser, we don’t want you to either miss out, or get caught out, by not checking your policy. It is important to understand what you are covered for and that it is still matching you and your needs.

Reason 1: Your life has changed
Time flies, so your circumstances can change quickly through life events such as having children, buying a house or changing jobs. What was the right cover before, could now be falling short of that comprehensive protection plan. As an adviser, we see people’s lives change dramatically from one meeting to another.

It’s easy to assume you are already “covered”, because you have some protection. But it is important to always ask yourself what would happen in the event of a serious illness or the unfortunate death of a breadwinner. Would your loved ones have a steady income to rely on and pay the bills? Even a stay-at-home spouse has financial value worth protecting, especially if they are looking after children.

Ask yourself: Do I have fewer or more dependents than before? Do I need to update beneficiaries on my life policy? Are there any options I can add onto my policy? Do I need to increase my coverage?

Reason 2: Matching your budget with your cover
We can help you check whether your budget could now cover more protection. If you can afford to build on your existing cover, it is economical to purchase protection when you are young, as premiums are generally lower for the same level of protection.

Reviewing protection doesn’t always have to mean increasing the costs, as your circumstances may now mean a more cost effective option for your policy. You may also consider whether your policy has been written into trust, which can prevent the policy forming part of your estate and being liable for Inheritance Tax.

Reason 3: Ensure you know about the extras
Royal London’s Helping Hand, Aviva’s Best Doctors Global Treatment and LV’s Doctors services are just three examples of the additional support your policy could deliver. Some of the support is also available throughout the term of the policy, so you may not even need to claim.

Some providers such as AIG, Scottish Widows, Royal London and Zurich are already delivering annual statements to policyholders. This will ensure you are aware of the policy details and the current extras and benefits that are offered.

Still not covered yet?
It is never too late to get protection. We can discuss a variety of options and create an effective menu plan to fit your needs and circumstances directly.

A Beginner’s Guide to Remortgaging

What is remortgaging?

Remortgaging is the process of switching a mortgage to a different lender without moving homes. For many borrowers, it is also the ideal opportunity to review their personal and financial circumstances and to consider whether their current mortgage and lender is the most suitable for them.

What are common reasons to remortgage?

  • Your mortgage deal has already come to an end and you have been placed on your lender’s standard variable rate (SVR)
  • Your existing deal is nearing its end and you will soon be placed on your lender’s SVR
  • Reduce monthly repayments and gain extra flexibility on your mortgage term
  • Borrow more money, possibly for home improvements or to pay off other debts
  • Release equity from your home
  • The value of your home has increased substantially
  • Ensure your mortgage meets your personal and financial needs
  • To change to a different type of mortgage

What if you want to stay with your current lender?

If you wish to stay with the same lender when your current deal comes to an end, you can simply complete a product transfer. This means you will be placed on a new product with your existing lender.

Remortgage jargon

Bank of England Base Rate- A rate of interest that is set by the Bank of England. If the base rate rises and your mortgage has reverted to SVR then your mortgage payments are likely to increase.

Early repayment charges (ERCs)- Fees you may have to pay if you wish to leave your mortgage at a specific time, for example, during the period of the initial deal.

Fixed-rate mortgage- The initial period of the deal which is usually between one and ten years where the mortgage interest rate remains the same. As a result, you can be certain that you will be paying the same amount each month for your mortgage.

Standard Variable Rate (SVR)- A mortgage deal will usually revert to this interest rate when the initial mortgage deal comes to an end. The SVR is decided by the lender and your payments may increase or decrease depending on interest rate movements.

Tie-in period- The period of time that you are tied in to your mortgage deal. If you want to leave your mortgage deal during this time you will usually have to pay early repayment charges.

A mortgage where the interest rate tracks the Bank of England base rate or London Interbank Offered Rate (LIBOR), depending on the lender

Want to discuss your current mortgage? To find out whether remortgaging is right for you and your circumstances, you can speak to our adviser today. We will assist you in reviewing your current mortgage and finding the best deal for you.

Is Your Interest-Only Mortgage Coming to an End?

If you are on an interest-only mortgage that is nearing its end, you may be considering the next step. The good news is, you won’t be alone. Nearly 136,000 interest-only mortgages are due to mature in 2017, with a combined value of almost £16 billion. Fortunately, lenders are innovating their products and making more options available for those with maturing interest-only mortgages.

Making plans
A study of those with interest-only mortgages revealed that some borrowers have no plan in place for how to take care of their mortgage reaching maturity. Borrowing into later life can be a complicated scenario and one that needs careful consideration. As your adviser, we would love to help you plan your next step and look through your options.

To get you started, here are just a few ways that lenders can help those borrowing later in life…

Specialist options
There are many specialist lenders that cater for those that require bespoke borrowing options later in life. Several have been working to innovate their over 55s range of mortgage products. These include residential interest-only mortgages, specifically designed for those aged 55 and over, and other tailored older borrower solutions. Some building societies and smaller lenders want to ensure that age is no longer a problem for those that want to borrow into retirement. One lender recently launched as many as 28 new older borrower products, which includes several interest-only options. Specialist lenders often don’t use computers to decide whether you should have a mortgage, and want to help those that need to consider a more nuanced post-retirement borrowing option.

Later life lending
The percentage of people aged over 66 when their mortgage ends climbed from 22% in 2012 to 39% in 2016, a significant increase in just a few short years. Mainstream lenders are now extending their maximum age limits to follow the trend.

Several high street lenders have recently increased their maximum age to 80 and in some cases 85. In their determination to help older borrowers, some lenders even have no maximum age limit whatsoever. Contact us today to arrange a meeting!


Remortgage Market Expected to Continue Growing

According to the Council of Mortgage Lenders, both residential and buy to let remortgaging is expected to continue to grow in the second half of 2017. Low mortgage rates has continued to encourage borrowers to refinance and move away from their lender’s SVR amongst tough competition between lenders.

But despite the continuing strength of the remortgage sector, homeowners are being warned not to be complacent. For those still considering the options and weighing up the benefits, the time to remortgage could be now.

A surprise result at the Bank of England
Nearly three in five people that remortgaged in May said they believed the average mortgage rate would be unlikely to change over the next 12 months. But June’s vote on interest rates from the Bank of England’s Monetary Policy Committee (MPC), kept rates at 0.25% by only five votes to three.

Despite some signs of a possible economic slowdown, three members of the committee voted for an interest rise amidst rising inflation. It has been a full decade since the Bank of England last raised the base rate and this result has ruffled several feathers in the industry.

A warning of complacency amidst low rates
There are currently millions of people sitting on their lender’s Standard Variable Rate (SVR). In fact according to the BSA, 2.5 million mortgage borrowers have never experienced a base rate rise.

Homeowners are therefore currently being urged to be wary of complacency and to take advantage, especially as lenders compete for new customers, helping drive down the cost of mortgages. Data from the Mortgage Brain shows that the cost of a five-year fixed rate loan at 70% LTV is now only 2.04%. This is a full 2% lower than it was at the start of April 2017.

But many experts are saying that after the MPC’s latest vote and due to rising inflation, we are as close to a rise in base rate as we have ever been in recent years.

If your current deal is reaching its end or you would like to find out whether you could be saving money on your mortgage, contact one of our advisers today to arrange a meeting and discuss your options.

Looking Beyond the Claim Stats

The protection market has fought against the myth that policies are simply too unreliable for some time. The market has worked hard to address this, and once again the latest claim stats released by a number of providers show that they are very much on the customer’s side. But are stats alone enough to break through the protection myth barrier?

Public perception
Figures from the Association of British Insurers (ABI) showed that in 2016 insurers paid out 97.3% of claims. But research from a leading provider revealed that over a quarter of consumers (26%) still believed that insurers did not pay out in the event of a claim at all.

Some experts believe it is about more than just prevailing myths and disproportionate media focus. They suggest that one of the big problems with claim statistics is that it is almost impossible to stand out from the crowd. After all, most providers produce claim statistics that are as strong as each other, which some suggest may create a sense of public apathy.

A new era for protection
Looking beyond statistics, insurers are focusing more on the policyholder, with an emphasis on the support and services that they need. Providers are speeding up the claims process, advancing payments to help with funeral costs, and increasing the care and bereavement support through access to third parties and medical professionals.

Added benefits and rewards are moving policies from the bottom of the desk drawer to the forefront of the policyholder’s mind. In a win-win scenario for both client and provider, some providers now deliver incentives for keeping healthy and reducing the risk of suffering an illness.

The difference is that more people are talking about their policies, which could help develop a culture based on customer experience. Meanwhile, providers are continuing to develop their policies and share case studies and real-life scenarios. This, along with the continuing success rate of claims, will help advisers talk to clients about the importance of protection.

If you would like to find out more about your protection options, contact one of our advisers today to arrange a meeting.

Landlords Prepare for September’s Changes

The buy to let sector has seen a number of changes in recent years. This has been a challenge for landlords, lenders and advisers alike during a period of adaptability, flexibility and resilience.

But with the Prudential Regulation Authority’s (PRA) second phase of new underwriting standards for buy to let lending coming into effect on 30th September, there is further in store for the sector. Some lenders are already making announcements regarding their approach to buy to let portfolio lending, which means landlords need to prepare now.

What exactly is changing?
In line with guidance set out by the PRA, from 30th September 2017 landlords who have four or more mortgaged buy to let rental properties will be considered as portfolio landlords by lenders. The PRA expects all firms that conduct lending to portfolio landlords to use a specialist underwriting process that takes into account complex borrowing scenarios.

This will require the entire portfolio to be underwritten when applying for a new buy to let mortgage, even if the other mortgages are with a different lender. Lenders will also be required to use additional affordability tests on portfolio landlords and will require additional documentation to support applications.

How can landlords get ready?
Specialist lenders, already experienced in using a similar underwriting approach, have been clarifying their stance and assessment criteria. Outside of the specialist lending market, the majority of mainstream buy to let lenders have yet to confirm their plans, aside from The Mortgage Works who will continue to support portfolio buy to let lending going forward.

Industry commentators have raised concerns that the upcoming rule changes and a lack of support from larger buy to let lenders, could ultimately reduce the availability of loans to portfolio landlords and increase the price of lending.

There is likely to be more clarifications in the coming weeks leading up to 30th September and many experts are calling for quick clarification where possible. Landlords will need to keep up to date on lender announcements regarding portfolio lending. Depending on your situation, some of these stances may affect your current or future plans.

If you would like to find out more and get up to date on the upcoming PRA changes, contact an adviser to discuss.